Corporate profits are growing nearly three times faster than India's GDP: Report

Corporate India's earnings have expanded at nearly three times the pace of the broader economy over the past six years, highlighting a structural shift in profitability and the growing contribution of listed companies to India's economic output, according to a report by Motilal Oswal Financial Services.

The brokerage's latest India Strategy report showed that profits of Nifty-500 companies recorded a compound annual growth rate (CAGR) of 28.7% during FY20-FY26, sharply higher than the nominal GDP CAGR of 9.5% over the same period.

The strong earnings trajectory has pushed the Nifty-500 corporate profit-to-GDP ratio to a record 5.2% in FY26, the highest level ever recorded for the index and nearly 2.6 times the level seen in FY20.

Profits have gone up

According to the report, corporate profits for the Nifty-500 universe rose to ₹18.1 lakh crore in FY26 from ₹3.97 lakh crore in FY20, while nominal GDP increased from ₹201 trillion to ₹346 trillion over the same period.

In FY26 alone, Nifty-500 profits grew 15.6% year-on-year, significantly outpacing nominal GDP growth of 8.9%. The report noted that economic growth moderated due to weaker manufacturing activity and softer external demand, although strength in services, improving agricultural output and accelerating investment spending provided support.

The report said Corporate India's earnings strength has come to the forefront despite geopolitical uncertainties and their impact on markets and the economy.

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Five sectors shine

A handful of sectors have been responsible for the bulk of the profitability gains.

Banking, financial services and insurance (BFSI), Oil & Gas, Automobiles, Metals and Technology together accounted for 76% of the overall corporate profit-to-GDP ratio.

BFSI emerged as the single largest contributor, accounting for 1.94% of GDP. Oil & Gas contributed 0.68%, followed by Automobiles at 0.52%, Metals at 0.42% and Technology at 0.40%.

Among sectors, automobiles made the biggest contribution to the year-on-year increase in the ratio, adding 0.19 percentage points. Oil & Gas contributed another 0.15 percentage points, while Metals added 0.07 percentage points.

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Strong comeback by PSUs

The report also highlighted a sharp revival in public sector enterprises.

On an ownership basis, private companies within the Nifty-500 recorded a profit-to-GDP ratio of 3.2%, while PSU companies improved to 1.8%, driven by broad-based earnings recovery in PSU banks, insurance firms and oil and gas companies.

PSUs have witnessed one of the strongest recoveries since FY20, with their profit-to-GDP ratio rising more than threefold from 0.5% in 2020.

Large-cap companies continued to dominate the profit pool, contributing 3.94% to the overall ratio, while mid-caps reached a 15-year high contribution of 0.87%. Small-cap companies accounted for 0.42%.

Earnings momentum expected to continue

Motilal Oswal expects the trend of corporate earnings outpacing economic growth to continue in FY27.

The brokerage forecasts Nifty earnings growth of 15-16% in FY27, compared with projected nominal GDP growth of 11-11.5%.

However, the report cautioned that geopolitical tensions and higher commodity prices linked to the West Asian crisis remain key risks and could affect India's macroeconomic parameters and monetary policy outlook.

If earnings continue to outgrow the economy, Corporate India's share in national output could expand further, reinforcing a trend that has gathered pace since the pandemic years.

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